Mortgage Loans - The Basics
Buying a home is a big decision. It is actually a really big responsibility to buy a home because it is such an expensive purchase. In order to get into a home, you will most likely have to borrow money from a bank to cover the cost of the home. This type of loan is known as a mortgage. The ease of getting a mortgage can fluctuate depending on the economic climate of the country.
One of the most common types of mortgages is a fixed rate mortgage. The amortization schedule for fixed rate mortgages can be ten, fifteen, twenty, thirty and now even forty years long. The most common fixed rate mortgage is on a thirty year schedule. Just like with any loan, the shorter the term of repayment, the less money the loan costs you over time since you are paying interest for a shorter amount of time.
Over the past five to ten years, an adjustable rate mortgage, or ARM, has become increasingly more popular. As the name suggests, adjustable rate mortgages have interest rates that adjust as the market changes. A few years back, when the real estate market was booming and you could get really low interest rates, people signed up for these mortgages. Many of them are facing financial troubles as now the market has shifted and the interest rates have soared increasing their monthly payments.
This can be difficult to manage if you don't plan for it. If your monthly income is fixed, but your mortgage isn't, you could end up not being able to make the payment and eventually lose your home. A lot of people think that if they ever hit a point where they can't afford their home they will just sell it. This is a misconception though because you can only sell your home if there is someone willing to buy it.
When you have a down payment, it might put a lender a little bit more at ease when it comes to lending you the money. With money down on the house, even if you default on payment and end up losing the home, the bank won't be out as much money as they would have otherwise been. The other plus side to putting money down is it will help keep your monthly mortgage payment lower and more manageable.
Mortgages are virtually necessary if you plan to purchase a home. People rely on lenders to make the American dream of owning a home possible. If you prepare yourself financially for the time when you will take on a mortgage, you will never regret it.
One of the most common types of mortgages is a fixed rate mortgage. The amortization schedule for fixed rate mortgages can be ten, fifteen, twenty, thirty and now even forty years long. The most common fixed rate mortgage is on a thirty year schedule. Just like with any loan, the shorter the term of repayment, the less money the loan costs you over time since you are paying interest for a shorter amount of time.
Over the past five to ten years, an adjustable rate mortgage, or ARM, has become increasingly more popular. As the name suggests, adjustable rate mortgages have interest rates that adjust as the market changes. A few years back, when the real estate market was booming and you could get really low interest rates, people signed up for these mortgages. Many of them are facing financial troubles as now the market has shifted and the interest rates have soared increasing their monthly payments.
This can be difficult to manage if you don't plan for it. If your monthly income is fixed, but your mortgage isn't, you could end up not being able to make the payment and eventually lose your home. A lot of people think that if they ever hit a point where they can't afford their home they will just sell it. This is a misconception though because you can only sell your home if there is someone willing to buy it.
When you have a down payment, it might put a lender a little bit more at ease when it comes to lending you the money. With money down on the house, even if you default on payment and end up losing the home, the bank won't be out as much money as they would have otherwise been. The other plus side to putting money down is it will help keep your monthly mortgage payment lower and more manageable.
Mortgages are virtually necessary if you plan to purchase a home. People rely on lenders to make the American dream of owning a home possible. If you prepare yourself financially for the time when you will take on a mortgage, you will never regret it.
About the Author:
Trinity walks people through the process of getting mortgages with bad credit and personal loans.
posted by Debt Consolidation Loan at
12:56 PM
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